Classmates.com 2008 Annual Report Download - page 28

Table of Contents
• we will be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing
funds available for working capital, capital expenditures, dividends, acquisitions, and other purposes;
• our ability to obtain additional financing to fund future working capital, capital expenditures, additional acquisitions, and other
general corporate requirements could be limited;
•
the credit agreements impose operating and financial covenants and restrictions on us, including limitations on our ability to use
FTD cash flow for the benefit of subsidiaries other than FTD, and on our ability to use the cash flow of subsidiaries other than
FTD for the benefit of FTD, and compliance with such covenants and restrictions may adversely affect our ability to adequately
finance our operations or capital needs in the future, to pursue attractive business opportunities that may arise in the future, to
redeem or repurchase capital stock, to pay dividends, to sell assets, and to make capital expenditures;
• our failure to comply with the covenants in the credit agreements, including failure as a result of events beyond our control, could
result in an event of default under the applicable credit agreement (and any other credit agreement which contains a cross-default
provision), which could cause all amounts outstanding with respect to that debt to become immediately due and payable and
could materially and adversely affect our operating results, financial condition and liquidity;
•
we will experience increased vulnerability to, and limited flexibility in planning for, changes to our business and adverse
economic and industry conditions;
• we could be placed at a competitive disadvantage relative to other companies with less indebtedness;
•
our ability to apply excess cash flows or proceeds from certain types of securities offerings, asset sales and other transactions to
purposes other than the repayment of debt could be limited; and
• the interest rates under the credit agreements will fluctuate and, accordingly, interest expense may increase.
Under the terms of the credit agreements, we will be permitted to incur additional indebtedness subject to certain conditions, and the risks
described above may be increased if we incur additional indebtedness.
Our credit agreements include guarantees on a joint and several basis by our existing and future, direct and indirect domestic subsidiaries
and are secured by first priority security interests in, and mortgages on, substantially all of our direct and indirect subsidiaries' tangible and
intangible assets and first priority pledges of all the equity interests owned by us in our existing and future direct and indirect subsidiaries (except
with respect to foreign subsidiaries in which case such pledges are limited to 66% of the outstanding capital stock). The occurrence of an event
of default under the credit agreements could permit the lenders to terminate the commitments of such lenders to make further extensions of credit
under the credit agreements, to call and enforce the guarantees, and to foreclose on the collateral securing such debt.
We may not realize the benefits associated with our assets and may be required to record a significant charge to earnings if we are
required to expense certain costs or impair our assets.
We have capitalized goodwill and identifiable intangible assets in connection with our acquisitions. We perform an impairment test of our
goodwill and indefinite-lived intangible assets annually during the fourth quarter of our fiscal year or when events occur or circumstances
change that would more likely than not indicate that goodwill or any such assets might be permanently impaired. If our acquisitions are not
commercially successful, we would likely be required to record impairment charges
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